Baldwin Insurance Group (BWIN) stock is falling after Blue Orca Capital published a short report on the company. The activist investment firm revealed a short position in Baldwin today, accusing the insurance firm of “questionable financial engineering” and inflating multiple financial metrics. News of the detailed report is pushing BWIN stock down amid high volatility.
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Does this mean Baldwin’s winning streak is over? Let’s take a closer look at the Blue Orca short report and assess what investors should expect in the near future.
What’s Happening with Baldwin Group Stock?
After plunging last week, Baldwin Group stock’s decline has accelerated today, likely due to the new short report. As of this writing, BWIN stock is down 1% for the day after exhibiting extremely volatile trading patterns. If Blue Orca’s accusations are true, this may mark the end of the winning streak that pushed the stock up 82% over the past six months.
In the short report, Blue Orca stresses the significance of the financial maneuvering it observes in Baldwin’s operations. The report states that its authors believe “erasing commission costs inflated Baldwin’s adjusted EBITDA by nearly 50% and its operating cash flows by 252% over the last four and a half years.”
It also alleges that Baldwin is guilty of understating both its contingent earnout liabilities and leveraged ratio. If the U.S. Securities and Exchange Commission (SEC) launches an investigation into these accusations, it could easily push shares down. If Blue Orca’s allegations are found to be credible, BWIN stock would likely plunge after rising 140% over the past year.
Is Baldwin Group Stock a Buy, Sell or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BWIN stock based on four Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. After a 140% rally in its share price over the past year, the average BWIN price target of $54.75 per share implies 8.76% upside potential.
The most recent analyst take came two weeks ago when Adam Klauber of William Blair upgraded BWIN stock from a Market Perform rating to Outperform. However, the case against Baldwin Group made by Blue Orca may lead to some experts rethinking their positions.
